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Almost all of Wednesday’s losses were overcome as stocks rallied Thursday on strong economic news and better-than-expected earnings from the technology sector. The Nasdaq, up 1.3%, was the chief beneficiary of the rally. The broad-based S&P 500 gained 0.9%, setting another new all-time high.

Visa (NYSE:V) jumped 5.7% after reporting better-than-expected earnings and revenues. Facebook (NASDAQ:FB), up 5.6%, and Yelp (NYSE:YELP), up a whopping 27%, also gained on better results.

Unemployment benefits fell to the lowest level in over five years, and non-farm business labor productivity increased 0.7% in Q1 versus a drop of 1.7% in Q4 2012.

At Thursday’s close, the Dow Jones Industrial Average was up 129 points to 14,830, the S&P 500 rose 15 points to 1,598, and the Nasdaq jumped 41 points to 3,341. The NYSE traded 676 million shares and the Nasdaq crossed 409 million. On both major exchanges, advancers exceeded decliners by 3-to-1.

Fear gripped traders on Wednesday when weak economic data drove stocks lower, erasing the week’s gains and threatening to break into the support zone below 1,575 and the 50-day moving average at 1,556. But the reaction to the unfavorable data lacked volume with just 4-to-1 negative breadth on the NYSE and less than 3-to-1 on the Nasdaq.

Thursday’s reversal not only overcame Wednesday’s losses, but even ran, by 0.02 points, to a new closing high.

But Thursday’s big news, from a technical perspective, was the Nasdaq’s reaction to the better economic numbers, i.e., new highs and a renewed drive into uncharted territory.

It appears investors have finally focused on some of the most undervalued technology stocks that drive the fortune of the Nasdaq. If that is true, then the focus of buyers may be shifting toward growth-oriented stocks instead of income-oriented stocks.

I’ve noted lately my disappointment with the market’s failure to include the techs, since without their participation, there is an incomplete rotation of sectors and that could stymie a significant broad breakout.

Conclusion: It’s a powerful stock market that can withstand the unfavorable economic reports of Monday and Tuesday, and respond with a snapback of the Dow with a triple-digit gain and new highs on the Nasdaq on Thursday.

Thursday’s reports included unemployment claims that are the lowest since January 2008, a trade deficit that narrowed sharply, plus U.S. productivity gains of 0.7% in Q1. The crucial April monthly employment report will be released this morning at 8:30 a.m., and the market’s reaction to it could chart the course of stocks for the month of May.